It’s no secret that there’s a shortage of available homes for sale in today’s real estate market. But the reasons behind the shortage are a little less obvious. Some experts believe the low inventory is a result of several factors, among which include homeowners still struggling with low equity as a result of the Great Recession. However, there are some experts that are looking at a particular generation that’s causing a clog in the inventory pipeline: Baby Boomers.
According to REALTORMag, The National Association of Realtors’ official magazine, baby boomers are “showing a desire to age in place in their current homes, and their refusal to sell is creating a clog in the market.” This sentiment is backed up by the results of realtor.com’s Housing Shortage Study, which identified baby boomers and homeowners who simply don’t wish to move as the two key culprits in the current inventory dilemma.
According to the study, 85 percent of baby boomers surveyed say they are not planning to sell their home in the next 12 months. That eliminates around 33 million homes as eligible for entering the market in the next year. Unfortunately for millennials, who are the next generation of home buyers, that severely narrows their choices.
“Boomers, indeed, hold the key to those homes the market desperately needs, both in the urban condo and the detached suburban home segment,” says Danielle Hale, chief economist for realtor.com. “But with a strong economy and rising home prices, there’s really no reason for established homeowners to sell in the short term. Although downsizing might be on the minds of boomers, they face the same inventory shortages and price increases plaguing millennials.”
The survey also discovered that an overall lack of desire to move is holding up the market. Sixty-three percent of respondents indicated that their current home meets the needs of their family. They cited low interest rates (16 percent), recently purchased their home (15 percent), and needing to make home improvements and low property taxes (each at 13 percent) as reasons not to sell.
“Life events drive real estate transactions,” Hale says. “When the majority of homeowners feel their family’s needs are being met by their current home, there is nothing compelling them to put their home on the market.”
This would leave one to wonder, who is planning on putting their home on the market? And will these homes provide the much-needed starter homes currently absent from the market? According to REALTORMag, the supply of starter homes is down 17 percent from last year; however, 60 percent of survey respondents said they plan to sell in the next year. And what’s better, these respondents are millennials who are ready to move up to a larger home or one with nicer features. This will bring more starter homes to the market and hopefully open up opportunities for more millennial home buyers.